Premiers get a taste of Harper's negotiating style

PM bargained with the Americans and the premiers at the same time

The softwood lumber agreement is at least as revealing of Stephen Harper's negotiating tactics with the provinces as it is of his deal-making strategy with the United States.

While he wanted a deal at the table with the U.S. in Washington, he needed the support of the producing provinces to make it fly at home. He got both.

The agreement, after less than three months in office, is an impressive achievement when measured against the legacy of failure by Harper's predecessors over the last five years.

Harper succeeded where Paul Martin and Jean Chretien failed because he repudiated their anti-American rhetoric and personally engaged the president of the United States. The outcome demonstrates that it is possible to sustain the national interest without being disagreeable about it. It also demonstrates that it is possible to do business with George W. Bush without endorsing his foreign-policy agenda of American exceptionalism.

But Harper also has bottom lines and he works within timelines. He made it clear to Bush that unless he got what he needed to bring the provinces onside, he would walk away from it.

He subsequently made it clear to the provinces that this was it--there could be tweaking but no more talks. This deal or no deal.

In effect, Harper was negotiating on both sides of the table, with the Americans in Washington and with the provinces and industry back home.

The deal came down to an important trade-off - the Americans would lift the duties and return most of the $5 billion they've collected since 2001 in return for the Canadians accepting a cap of 34 per cent of market share in the U.S. How Harper divvied up the 34 per cent with the provinces was his business. And his problem.

Of the three major producing provinces, Harper needed at least two, Quebec and British Columbia, to make it work. The third, Ontario, was important, but not essential. Harper needed Quebec because it holds the key to his hopes of winning a majority in the next election. And Jean Charest getting a good deal for Quebec would enhance his own prospects for re-election next year, which also happens to be a priority for Harper.

Quebec's industry is largely composed of small sawmills in rural areas. They've been under serious financial pressure and can use the cash. They'll take the 80 cents on the dollar, which represents about $1 billion for the industry in Quebec. At all times in this negotiation, Harper kept in close touch with Charest.

B.C.'s Gordon Campbell represents more than 50 per cent of Canada's exports to the U.S. The industry is roughly divided between big producers who wanted the cash and certainty of access and small ones in the B.C. interior who didn't necessarily want in on the deal. One big producer alone, Canfor, stands to recoup about $450 million in refunded duties.

Harper announced the deal in the House at 5 p.m. last Thursday, but as late as 4.30 he was still on the phone with Campbell, working to close the deal. By then, Ontario, which had angrily denounced the framework agreement only 24 hours earlier, had moved onside.

There were two elements in securing Ontario's support. First, Harper agreed to protect its market share. And then Dalton McGuinty risked being isolated, and no Ontario premier likes to be outside a national consensus.

And finally, Campbell understood that while the deal was imperfect, it was never coming back. And that his own industry, weary of the five-year war, was ready to settle.

This is the first insight the premiers have had into Harper's negotiating style. While Martin was prepared to do one-off deals with the provinces, Harper prefers to negotiate with them as a group. While Martin became a hostage of his own rhetoric, as in his pledge to fix health care for a generation, Harper manages expectations by reducing them.

Yet he also keeps his eye on the prize. In the talks between the Canadian Alliance and Progressive Conservatives in the fall of 2003, Harper accepted a merger of equals because the Tories had what he wanted, the Conservative trademark, a respected moderate and national brand. The day he acquired it, he began moving the merged party to the centre.

There are three big winners in the softwood lumber agreement: Harper, who got a deal; Michael Wilson, our ambassador to Washington, who delivered it; and David Emerson, the trade minister, who got the monkey of crossing the floor off his back.

The losers are the Liberals, who failed to make a deal in five years, even when the outlines of an agreement were within their grasp. For all their expressions of outrage in the House last week, their long faces betrayed their true glum feelings.

They knew they could denounce the deal as a sellout as much as they wanted, but the Liberal premiers of Canada's three biggest provinces, and the industry, had accepted it.